Legal foundations of green finance and carbon markets: A comparative analysis of green bonds and emissions trading systems in the European Union and Türkiye

The increasing global visibility of environmental impacts and climate change has compelled financial systems to adapt to this transformation. In this context, environmentally oriented financial instruments such as green bonds and market-based emission reduction mechanisms like carbon markets have become not only tools for achieving environmental goals but also integral parts of economic and legal policy frameworks. The effectiveness and credibility of these instruments in attracting investors and functioning efficiently in the market are closely tied to the clarity and reliability of the legal and institutional structures governing them.This study offers a comparative analysis of the regulatory infrastructure for green finance and carbon markets, beginning with their conceptual foundations and extending to the frameworks established in the European Union and Türkiye. The first part outlines the concept of green finance, the international principles guiding green bonds, reporting and verification mechanisms in this field, and the structure of carbon markets, including the legal status of emission allowances and the fundamental mechanics of emissions trading systems. Building on this foundation, the second part explores the European Union's sustainable finance strategy, examining regulatory instruments such as the EU Taxonomy, the European Green Bond Standard, the Carbon Border Adjustment Mechanism, and the Fit for 55 Package. The formation, operation, and oversight of the EU Emissions Trading System are also analyzed, along with the legal implications of classifying emission allowances as financial instruments under the MiFID II framework.The final part of the thesis focuses on developments in Türkiye regarding green finance and carbon markets, encompassing current regulatory practices and prospective legal strategies. The institutional framework of the domestic green bond market is assessed through the Guide on Green Debt Instruments, Sustainable Debt Instruments, Green Lease Certificates, and Sustainable Lease Certificates, which outlines key regulatory principles. Additionally, the Türkiye Sustainability Reporting Standards (TSRS) are evaluated as a complementary disclosure tool. The legal and institutional groundwork for implementing an emissions trading system is analyzed with reference to the Climate Law, the Energy Market Regulatory Authority's Draft Regulation on the Operation of Carbon Markets, the Climate Change Directorate's Draft Regulation on the Türkiye Green Taxonomy, Draft Regulation on the Turkish Emissions Trading System and Draft Regulation on Carbon Crediting and Offsetting. This section examines the legal basis for carbon pricing mechanisms, the allocation of institutional authority, and the structure of market oversight. A comparative assessment is conducted with the EU ETS, highlighting structural and functional similarities and differences, with the aim of offering recommendations to improve legal coherence and operational effectiveness in the Turkish context.